Harry Triguboff pours cold water on build-to-rent tax break push

Harry Triguboff, the country's biggest owner of rental apartments, said developers such as Lendlease, Mirvac and Stockland wanted a low-tax vehicle to invest in build-to-rent housing because they were trying to drum up capital at a time of harder access to funds.

Developer Mr Triguboff, the country's second-richest person, who also owns a portfolio of more than 4000 apartments that he rents out - separately from the serviced apartment business of his company Meriton - said the current build-to-rent drive was pushed by his local rivals and he had not seen any evidence that foreign institutions were asking for it.

"They want… a tax break," Meriton boss Mr Triguboff told The Australian Financial Review. "But the interesting thing is, it's not the people with the money talking. It's the schnorrers that have no money to build."

'It's not the people with the money talking. It's the schnorrers that have no money to build': Harry Triguboff. James Brickwood

While the notion of commercial, or at-market, housing built for long-term rent to middle-income households is an established asset class in the US and UK, it has not become established in Australia because tax concessions for investment in residential housing are not available to institutions in the way they are to mum-and-dad investors and low yields on residential property do not make it viable.

Last year, Treasurer Scott Morrison ruled out the use of managed investment trusts, a vehicle that pays a low 15 per cent withholding tax, for at-market residential property, saying they had to be limited to the purpose of affordable, or key-worker, housing.

But Mr Triguboff, who subsidises his own rental portfolio with profit from his development projects in Sydney, Brisbane and Gold Coast, questioned whether foreign institutions were interested in Australian build-to-rent as an asset class.

"I'm critical of people talking about it without naming who are the people that will invest," he said in an interview with the Financial Review.

"I don't think they have people that will invest. I think what they are trying to do is sell the idea to Morrison, then they will run around and get somebody. That's how it appears."

Build-to-rent housing push is a way for developers to drum up capital at a time of harder access to funds, says developer Harry Triguboff. James Alcock

The Property Council of Australia, which represents developers including Lendlease, Stockland and Mirvac, said build-to-rent was necessary to spand both the supply and range of housing, and that foreign capital was necessary to kick the sector off in this country.

"Build to Rent has worked well overseas but the key to a successful model is scale, meaning it will be important to attract investment capital to develop the asset class," council chief executive Ken Morrison said.

"Given the newness of the asset class in Australia, there will be an important role initially for the experience of foreign institutional capability to support its growth in Australia."

Mr Triguboff questioned why taxes were going up for overseas buyers at the same time as developers were asking for tax breaks for other classes of investors.

"The Chinese want to buy without help from Morrison on tax," he said. "They don't ask for help. They want to buy."

James Sialepsis, Meriton's national sales director, said the MIT structure could allow listed developers to sell more housing to overseas investors than they are currently allowed to do.

"A residential developer that's financed generally has a restriction on how many overseas buyers they can sell because finance institutions will not use FIRB sales as pre-sales," Mr Sialepsis said.

"The federal government has also capped FIRB sales to 50 per cent. On the other hand, an MIT can effectively raise 100 per cent of their capital from overseas investors, and pay less tax than a local Australian investor."